Thursday, 30 June 2011

Readers will know by now that I have little sympathy for the Greek Indignados and the Syntagma protests.

Today’s events, however, are proof that something is deeply wrong with our Government. While markets cheered our new austerity programme being voted through, this sort of thing was happening:

Don’t get me wrong, I think the Greek Indignados are wrong on so many levels. I resent their politics, their economics and a good deal of their misguided civic values. I don’t believe the majority of the country wish to see an end to parliamentary democracy as some of the Greek Indignados do, nor do I think the majority are opposed to austerity and privatisations. I'll take parliamentary democracy over rule by circle-jerk any day. And I certainly don’t think protesters should be allowed to storm Parliament. But apart from this, the People must have the right to protest peacefully and I’ve seen enough from my safe perch here in London to know they are being denied this right by force.[Too tame or patronising for you? Well I just ate a working class baby, but I've saved room for your sarcasm. Keep it coming.]

Given a choice between disorderly default and a carte blanche to the police to disperse even non-violent protesters I know what I would opt for. I’d rather every last bank in Europe failed and every Greek pensioner, both my parents included, had to beg for food. You see, there has to be something worth saving for any adjustment programme to be legitimate.

I don’t believe the State owes anyone a living but it does owe them freedom. I’m sure they don’t teach you that at Socialist camp but in the better parts of the world it is a given.

The brutal repression of peaceful protest makes a mockery of democracy and equates any rejection of populist policies with a rejection of the people’s constitutional rights. We have crossed a threshold past which all hope of civilised, evidence-based public debate has ceased to exist. We have to somehow regain that space.

It is time to secure the People’s mandate for objectives far greater and more important than this government’s continued rule, or the opposition’s ascent to power. And we must build whatever coalition we can to pursue them. More importantly, we need a line drawn in the sand past which the People take responsibility for their choices. The Indignados claim to stand for the Greek people; I believe they do not. But as long as there is no formal evidence of the people's will, sympathy for the people beaten up by police will tend to relegate this question to irrelevance.

We need a referendum. Now.

The way I see it, there are two questions we need answered by the People, once and for all, and which we cannot deduce from the results of past elections.

First, what should we do with the national debt?

Default now on all Greek government debt

Default now on whatever amount of debt is deemed necessary to make Greece solvent

Achieve a primary surplus as soon as possible and then default [+1 from me]

Achieve a primary surplus as soon as possible and then proceed to pay down the national debt

Proceed with current memorandum commitments

Second, which of the following changes should we make to the current system of representative democracy?

Introduce Proportional Representation [+1 from me]

Devolve a substantial amount of Parliament’s powers, including the power to levy some taxes, to People’s Assemblies at the local level

Drastically reduce the number and compensation of representatives [+1 from me]

Drastically reduce the provisions of immunity for ministers [+1 from me]

Introduce stricter term limits for representatives and ministers [+1 from me]

In passing, I would urge all Greek readers to sign up to the No More Taxes! Primary Surplus Now! cause. We’re still far short of 1m members but we’ll get there!

Many thanks to the anonymous commentator discussing the Greek Crisis blog. Frankly, you've made me realise I have not read it in more than a year, so for that reason alone it's off the reading list. I cannot check whether what you say about them is accurate, though it's certainly plausible. A request; if you're going to make accusations (except those aimed at myself of course), I would urge you not to do so anonymously. Once again, thanks.

Tuesday, 28 June 2011

Right. Apparently these days everyone and their dog has to have a narrative about how Greece came to carry the massive debt burden we currently do. Some have done their homework before taking virtual pen to virtual paper, but many have not, so what you usually get is a quick overview of the current situation, and then some abstract bullcrap that could apply to any country, anywhere in the world and basically reiterates whatever political or theoretical prejudices the commentator has brought to the story.

But the common denominator for most is that they all start the story too near to the present day. Euro accession; the last Conservative government; the financial crisis. It's easy to fit a couple of years to the trend one has in mind, and yet miss the point spectacularly.

Take a look at this graph, showing the trajectory of Greek debt/GDP. This is the stuff your narrative has to account for. Where would you start telling the story?

I do not intend to write an economic history of modern Greece in this post. Only to fill in the gap the majority of commentators won't touch. Hopefully readers will do their own research and beef this up.

You see, as precipitous as the rise in national debt has been over the last couple of years, it is still amateur stuff compared to the way we piled on the debt between 1981, the year of Αλλαγή, the Change, ushered in by a massive 48% majority, (Time coverage here) and 1993, when the Maastricht rules finally started to bite and we were forced to pull the handbreak on our burgeoning government budget.

[Note than in 1993 the massive growth in the stock of debt is due to Greece being forced to recognise a big chunk of previously off-balance sheet debt, most of which was built up in the 80s. The actual deficit was much smaller than the jump in liabilities would imply.]

The years between 1981 and 1993 were, despite the protests of deathbed convertees and defaultniks, the years in which the Greek people were the most politically active. Voter turnout in those years was the highest we've ever had - reaching an eye-watering 84.5% in 1989. The politicians didn't sneak this debt past us and onto the nation's balance sheet; we watched them do it and urged on. Worse, once the gravy train ground to a halt, the Sainted People suddenly lost interest in centrist 'politics' altogether. The first elections after that, in 1996, were a washout, with voter turnout collapsing and only the parties of the non-governing Left gaining any ground at all.

And incidentally the years under Big Spender A-Pap just so happened to be the times in which the Greek people were the happiest with the state of Democracy in Greece. Apart from the time when we were hosting the Olympics; you know, the ones Debtocracy claims were a massive scam and somehow made a decisive difference to the dynamics of Greek debt.

If you're still in doubt as to whether 1981 was a popularly endorsed change of course, have a look at the video below. You will find that the crowds gathered in the centre of Athens put our current protests to shame. Yes that is our current Prime Minister's dad. The irony would be delicious if we didn't have to pay a terrible price for it.

The Greek people's dilemma in 1981 was framed in the most polarised of terms, as a battle between the Establishment of the Privileged v. Change for the dispossessed (more reading here). The goal of both sides was to capture the State, the ultimate redistributive mechanism. The Sainted People chose the latter by a landslide.

Within a single year, the Keynesian dreams of the Socialists had descended into disappointment (see a sympathetic but critical review here) and a new consensus began to be forged. As Spourdalakis puts it:

"the long standing problems of productivity and competitiveness of the Greek economy were to be solved through labour's 'responsible participation' in established tripartite corporatist bodies which would guarantee 'social peace' with wage concessions."

The year this Grand Bargain was born was, incidentally, also the year that I was born. One of the most popular ever Greek governments opted not to fix our fundamental competitive problem, but to placate all sides by buying them off. Were the People disappointed? No. In 1985 the socialists won another landslide victory (with a 46% majority) and the saga of the Socialists' οκταετία, the Eight-Year-Rule, was written. The Grand Bargain worked well enough to seduce both parties, Socialists and Conservatives, and an evolved version of it survived up until 2009. This is despite the fact that the Greek eighties technically qualify as a Great Depression; per capita GDP remained stagnant, despite a soaring debt load and money supply. The second half was, if anything, even worse than the first, because the Greek banks finally caught on to the game and public sector spending started to seriously crowd out private investment.

In this epic post, Pseudoerasmus looks into the realities of The Change, and sees a shift from Post-War Orthodoxy to 'Democratic Peronism.' I cannot go into all the details of Pseudoerasmus' argument here (you have to read it for yourselves, and I hear there's a sequel on its way!), but I wanted to focus on one of the post's graphs, based on Maddison Project data. As you can see below, Greece lost ground not just relative to the Eurozone core (as it would later become) during the 80s, but also relative to the rest of the periphery.

Save for a short period of fiscal consolidation meant to qualify us for Eurozone membership, which, contrary to the flawed hindsight of some, was in fact wildly popular in Greece (see pg. B 29 here and here), we never dropped the Grand Bargain until 2010. We only changed the way it was financed, with the EU and debt markets pitching in to pick up the slack from the overtaxed population. Some people will, upon reading about the smoking gun story of Goldman helping us disguise some of our debt in this process tend to decide they have heard all they need to know and that somehow it was Wall Street that spoon-fed us this debt. Well, there's no helping some people.

In fact, it was the Basel Accords, one after another, that spoon-fed European and other banks our debt, but this is such a long story that it deserves its own post.

Back to our story. By 1993, Greek debt had cleared 100% of GDP and the foundations of the current crisis had been laid. Now, sustaining that level of debt is not impossible, but it is very difficult; it takes a great deal of growth and/or inflation, and as inflation is a terrible tax on the poor and essentially uncontrollable, it was mostly growth that we depended on. By that time, the Greek economy was so dependent on high growth that any slowdown at all was going to be a disaster. Then came the biggest global recession in years, and the rest is history.

Sure, the story goes on, but by that time the dynamics of the Greek fiscal crisis were fixed. Did we have the chance to change course? You bet, long ago. But we didn't.

UPDATE: Commentators seem to be getting their knickers all tangled re: the amount of public spending that trickled down to the people.

I can only refer them to my review of Debtocracy for the figures: left graph shows gov't spending as a % of GDP, right graph shows spending on civil servant salaries (blue) and social benefits (red) as % of government spending.

Eurostat's data don't go back to 1981, which would have been amazing. But you can check the timing of corruption vis a vis the Change by looking at how measures of our underground economy grew during that time (source):

UPDATE: Regarding the data unearthed by our friend @epanechnikov: First of all, many thanks. One objection though. Although this is one very cool table (not least because it shows that PPP-adjusted income in Greece was higher, pre-crisis, than that of Germany, which is simply ludicrous), I should point out that, ceteris paribus, the poorer a population the greater the percentage it tends to direct to consumption of necessary goods and services, assuming similar levels of social security provision (lest someone quote China to me). Similarly, the poorer a population, the greater the percentage of consumption directed towards food (Engel's Law). I'm not sure the Turks, Romanians and FYRoMacedonians were overconsuming.

A better way of testing consumption is in terms of consumption spending per adult equivalent adjusted for purchasing power, as follows:

This makes more or less the same point but in much less extreme terms: in 2005 Greece's real consumption level was almost exactly at the Eurozone average. Higher than Denmark's, almost the same as Sweden's, and WAY higher than Spain's or Portugal's. Still, without median consumption data we still can't properly argue this point. Perhaps these figures are skewed by a small number of extremely wealthy people - but then again income inequality is only marginally higher in Greece than in Spain and lower than in Portugal (data here) so I'm not sure that is the whole story.

Sunday, 26 June 2011

As loyal readers will know, I've got my own take on the employment statistics coming out of ELSTAT. To the cynic, the headline employment and unemployment rates are rife for manipulation and may in fact, in a small country, be more noise than information.

Personally, I follow four sets of indicators that I think are more useful, and because they are not systematically reported anywhere they are likely to be less biased. It's that time of the year again when I look at what the cats from Peiraeus brought in. Here is the latest LFS quarterly release in Greek and in English. [Many thanks Ariadne for pointing out the linking error!] And here's what I'm looking for:

1. The number of unemployed turning down job offers.

Yes, it still happens and indeed it would in any labour market, good bad, improving or deteriorating. As I've discussed elsewhere, this figure incorporates a measure of the fear of unemployment but also some measure of expectation of future economic growth. This figure has come in at its lowest level since reliable records began.

2. and 3. The difference between the unemployment levels of foreigners and natives, postgraduate males and male school leavers.

These numbers are indicative of the returns to higher education and the extent to which migrant workers are welcomed by the labour market. When these figures deteriorate, you get angry young men. That's bad. This quarter, the returns on education part improved slightly, but the native bias deteriorated even further.

4. Unemployment in the worst-performing border region.

This figure tends to make politicians subject to nationalist pressures (not necessarily nationalists themselves) more likely to seek concessions from the party leadership. It could also mean more pressure to increase military spending.

This suggests to me that a surge of nationalist bullcrap is on its way. Brace yourselves, dear readers.

Last week I spent some time looking into the argument, first made by Alex Andreou in response to populist stereotypes propagated by foreign journalists and politicians, that Greeks work longer hours than the citizens of almost any other developed country. Alex’s post, Democracy v. Mythology, has travelled around the world and it’s encouraging to see that people are willing to stand up to slander with facts rather than Yo-mama-nomics. However, I was not entirely sure Alex's facts stacked up. So I checked.

I found, as readers will recall, that relying on the OECD figures is actually not very useful, and that once we adjust for self-employment (the unregulated labour market that does not reflect the Greeks’ political choices), prevalence of part-time work (which is rare in Greece and which the OECD just lumps in with full time work) and differences in the methods of data collection (LFS based methods like ours tend to give the highest estimates of hours worked), most of the difference is whittled away until we end up working respectable but not ridiculous hours. The rest is down to lower productivity, which we have to work extra hard to make up for. The point is well made that Greeks are not lazy, although we are frankly uncompetitive.

But I think it’s worth examining another claim made in this riotously popular post as it is highly misleading and could convince some of our fellow citizens that one policy area in terrible need of reform is actually viable – even though this is probably not Alex’s intention. Again, I must stress that Alex’s fact-based argumentation is refreshing and desperately needed: more people should adopt his rejection of sensationalism and racism. But in serving this purpose he keeps taking the bait of populist and sensationalist idiots in Europe and further afield, which means he ends up rebutting arguments that never really mattered and that more serious critics in Europe have never fixated on.

Still, if we examine the figures in detail, their story is fascinating and can sometimes be other than what it appears.

Countermyth: Greeks retire no sooner, if not much later, than other Europeans

The sensational claim against the Greeks making the rounds in some parts of Europe is that we retire at ridiculously early ages. True, some of us do but this is not the case in general. Alex demolishes this claim by demonstrating that the average Greek pensioner left the labour market later than his or her counterpart in most European states. Cudos to Alex for digging up the data and clarifying that point, but there’s a problem in his reasoning and it is inevitable when one is trying to out-stat moron journalists – he’s stepped into their idiotically framed argument and now his shoes are caked in shit.

You see, how late in life people retire is utterly beside the point. What matters is how long their working lives are, which in turn determines how big their retirement pot is (ok, whatever notional retirement pot they have in pay-as-you-go systems). Sensationalist politicians and journalists abroad (and some at home) might care about the retirement age but the real argument (and the question Greeks should be asking first and foremost) is whether or not we Greeks were running a sustainable pension system. You see, Amaryllis, who retired at 70 but joined the labour market at 35, may look on (news)paper like she’s been dealt a shit hand by the pension system compared to Gertha, who retired at 65 but joined at 25, but in fact for the purposes of pension scheme viability Gertha is a more viable ‘client’.

***THE EUROSTAT LINKS BELOW WERE NOT WORKING PROPERLY EARLIER. I BELIEVE I'VE FIXED THIS NOW***

In 2006, when Eurostat last collated the numbers on length of working lives across Europe, those Greeks who were still working after they had started receiving retirement benefits had on average worked for 29.9 years – the lowest number in Europe bar none (source). This ranking holds regardless of whether people worked to afford themselves a basic income or for personal reasons unrelated to money. Only one category of working pensioners in Greece had a working life behind them comparable to the EU average: the people that kept working despite having more or less enough to live on, simply because they wanted to top up their income and live more comfortably (source). And these guys had worked longer working lives than either of the other two groups.

But what of the people who were no longer working and living only on retirement benefits? Well they had spent an average of 34.6 years working. Of all the European countries, only a handful boasted shorter working lives (source), and these included fellow PIIG Spain, fellow Greeks Cyprus, and of course Romania, Bulgaria and Poland.

So you see, Alex, it is possible for both you and idiot Greek-bashing journalists or politicians to be wrong. Greeks work shorter working lives; hence the state cannot afford their pensions as well as other countries can. Or if it can afford those, it can’t afford their prolonged education before or their prolonged spells of unemployment during. No mythology, just pure math.

NOTE: As some trolls find it impossible to check official statistics for themselves, I should like to provide four pieces of advice.

1. click on the source links. It's way easier than making a washing machine, so even I can do it. The 2006 study is an ad-hoc module of Eurostat's Labour Force Survey - the collated dataset made up of the individual labour force surveys that we get, say, our unemployment statistics from; I know it's not as good as your anecdotal evidence based on a small sample of acquaintances, friends and relatives but it is the best I have access to, or that anyone else has access to for that matter. Check with someone of a nationality that you trust if you don't believe me.

2. If you need trade statistics that are up to date, go to an official source, not a random website. And remember to read the 'about us' section before you decide what is or is not a government website. As a rule you can tell a gov't website because they carry all manner of insignia showing which ministry or investment programme they are funded by.

3. if you don't know where the data come from or what they mean then perhaps you should look up the answers. For a start, I would look at Eurostat's metadata for the 2006 study. If that won't do, try the full evaluation report. Don't like the findings? Write to Eurostat and demand a correction.

4. read the article again just to make sure you've understood what I'm saying before vomiting your tedious thoughts onto my comments section.

I guess all of the above shows just how hard it is not to take the bait.

Wednesday, 22 June 2011

One of my favourite things about the UK is that occasionally, not often mind you, people collectively turn around and say 'wait, this is getting a bit confusing. Does anyone have the facts?'

The product of this mentality is the brilliant @fullfact, an independent fact-checking service which undertakes to clarify what the facts are in heated public debates. One day, when Greece has emerged on the other side of this LOLery, I hope we will have our own version of FullFact. I'll work for them for free while they get up and running and that is a promise.

Earlier today I gave them a few hints on the issue of the UK's exposure to Greek debt - their factcheck can be found here. Basically I relied on the latest figures from the Bank of International Settlements, which break down Greek debt into private and public and then into the countries it is owed to. A composite table of this looks as follows. (Source: BIS Quarterly Review Detailed Tables pg. 103 onwards)

All figures are current as of Dec 2010 (so quite dated), and expressed in US Dollars. Please note this is only banks' exposures to Greece, not those of other states or of course the ECB and IMF.

And are you wondering which banks are most exposed to Greece? From Barclays Capital, via FT Alphaville, who are now back in my good books:

In recent days a number of blogs are reposting a well-conceived but incomplete mythbusting exercise about Greece. I've most recently come across it in @panos101 's blog here, but the original source is Alex Andreou's celebrated post in sturdyblog. What follows is an elaboration on my comments in response. See also my post on the retirement statistics here.

The point of the exercise I take it is to disprove pejorative stereotypes of a siesta nation by demonstrating just how hard the Greeks actually work. The money shot is the OECD working hours statistics: at 2,120 hours per person, the Greeks blow everyone but the Koreans out of the water, working our knuckles to the bone. Take that, Merkel!

...except, there are several catches. But first, let us enjoy the music:

The first catch has to do with the contribution of the self-employed.

Toggle from total employed to dependent workers only (i.e. employees), and the average goes down to 1,777, which is still a very decent amount of work but hardly the triumphant show-stopper some might have hoped for. And it actually says pretty much what we knew; that in Greece the employed have it a hell of a lot better than the self-employed (that's business owners and freelancers, but also our small army of 'contractors' who are simply the thralls of rogue employers). Now these guys work like f***ing dogs. Consider that at the end of 2009 they made up about 36% of the workforce and yet adding them to the total increases the average working day by about a quarter. A calculation based on Q4 2009 figures tells me the average self-employed person worked over 2,700 hours a year or 53.5% more hours than the average employed person; these people account for 46% of all the hours worked in Greece. Adjust for this and you'll find that, instead of working 53% more than the Germans our proletariat end up working 35% more. Still a lot by the way. But it goes to show that the real graft in Greece takes place outside the cushy reality of employment regulation and that's nothing to brag about.

The second catch has to do with part-time employment, which our unions have declared war on from the get-go. You see the OECD figures actually lump part-time and full time employees together without any adjustment so countries with a larger percentage of part-time employees will tend to have fewer average hours to show for it. As this OECD table will show you, part-time employment is very rare in Greece. To take the example most likely to raise eyebrows, 22% of German workers work part-time against 8% in Greece, based on a common definition of part-time work to ensure comparability. Bearing in mind on top of this that according to Eurostat the average part time worker works 48% of the hours of a full time worker in Greece and 44% in Germany (source), the discrepancy between German and Greek part-time employment artificially adds about 8% to the working hours of the average Greek vis a vis the average German.

The third and biggest catch is that the data reported by the OECD are simply not comparable between countries even with our little adjustments in place. The OECD warns, in its metadata:

The data are intended for comparisons of trends over time; they are unsuitable for comparisons of the level of average annual hours of work for a given year, because of differences in their sources.

So the OECD are not happy for people to cite comparisons. But surely, you may object, the differences can't be that vast! Well, elsewhere the OECD says:

For several EU countries, the estimates are made by the OECD using results from the Spring European Labour Force Survey. The results reflect a single observation in the year and the survey data have to be supplemented by information from other sources for hours not worked due to public holidays and annual paid leave. Annual working hours reported for the remaining countries are provided by national statistical offices and are estimated using the best available sources. The data are intended for comparisons of trends over time and are not fully suitable for inter-country comparisons because of differences in their sources and other uncertainties about their international comparability.

I think we're all getting the gist of this by now. But there is more: an international review of labour statistics by the US Bureau of Labor Statistics found that LFS-based measures of hours worked, like the one we use, tend to provide consistently higher estimates of hours worked than other measures, probably because they are more accurate. How do they put it...

Data series of average annual hours actually worked based on normal and contractual hours concepts from administrative sources yield low measures of hours worked, whereas series based on establishment and labor force surveys provide relatively higher measures. The highest levels of hours worked are estimated directly from labor force surveys.

We've established by now that either the methodologies used by many other countries to measure hours worked tends to artificially deflate the actual number of hours worked. To this I should add that ELSTAT does not, as some people might think, have an *incentive* to inflate the number of hours worked to make us Greeks look more industrious.

You see data on hours worked are rarely published on a standalone basis (and few people actually notice them when they are) but are rather used to inform labour productivity estimates at the European and international levels. If anything, ELSTAT has an incentive to present the Greek economy as an ever more productive one in order to attract FDI and so on, so the thing to do is to deflate rather than inflate the number of hours worked in order to make it look like we're working smarter, not harder. Whether they have enough latitude to do so I don’t know but there’s certainly no incentive to inflate the figures.

This last point also explains why people like the OECD and Eurostat actually tolerate such large discrepancies in the measurement of data; in model-driven productivity estimates that single out Total Factor Productivity from other inputs, all that matters is the rate at which hours worked increase, not their absolute number. So as long as our hours total is internally consistent, the OECD and Eurostat are not too bothered about reinventing the wheel of Greek labour statistics.

Perhaps a better way of approaching this is to check whether hours worked increased or decreased in Greece over the last decade. I think most people's intuition is that they increased sharply but actually they did not, because productivity has grown instead. Hours are down 2.3% for employees (see below) but flat for the total workforce, which means the self-employed have been working harder. Simply put, the employment relationship, whose rules we the Greek people control through the law, is not much less favourable in terms of hours worked than in other countries, and it's getting better. It is what happens outside of the world of regulated work that increases our collective working hours.

Mind you, going by these figures alone the numbers still say in the clearest of ways that, say what you want of the country, the Greek people are not lazy. Good. That will come in handy when we default. They're not very productive either because, let's face it, if you bust your ass making products and services people won't pay for you can work your hands to the bone and it still won't make a difference. But that's another day's blogging, isn't it?

Sunday, 19 June 2011

I've spent a lot of my time in the last few months debunking conspiracy theories, responding to populist bullshit and generally being contrary to a lot of the popular sentiment in Greece. I am happy to take on this role as I feel it's desperately needed and I enjoy it most of the time because I feel genuine contempt for some of the people I criticise (though not all, and I hope the difference is discernible).

However, it is often the assumption of critics in Greece and elsewhere that enemies of enemies are friends etc, and that since I lambast populist MUPPETS who denounce the IMF and the memorandum I must, by inverse association, be an IMF apologist or "memorandum cheerleader" as one commentator put it. Here's some news for my critics: any idiot can criticise the IMF and the memorandum, and many idiots do. Don't make assumptions on where I sit ideologically just because I don't agree with populist bullshit.

Still, I would like to very briefly set the record straight on this one in one post that I can use in future as a handy reference. Here goes.

I am on the very public record as saying, back in July 2010, that Greece was bailed out to save European banks, not Greece itself, and that the bailout was only a temporary liquidity measure, when our problem is solvency. I explained back then that a massive recession was on its way and that there's no reason to expect anyone to lend to post-memorandum Greece who would not lend to pre-memorandum Greece, as the country will be more indebted and less capable of growth; hence the importance of reform. Finally, I pointed out in that interview that default has been historically proven to be a workable solution to a solvency problem and is an option for Greece. I still believe this, although people have to realise that timing the default is crucial and getting people to demand one right now is not going to help.

What I believe of the IMF is, first and foremost, that its intervention is tantamount to a loss of sovereignty (hence my 'Vassal State' references), which needs to be reversed as soon as possible (though note that as soon as possible does not mean 'now'). Had I been asked in a referendum, or if I had been an MP at the time, I would have voted in favour rather than accept a forced disorderly default and would have supported that decision even in hindsight. I actually also believe that any debt incurred under the IMF in excess of the original plan is in fact very close to odious and thus fair game for default because it has nothing to do with the will of the people. I have been very quick to sign a petition for an audit of Greece's government debt, even though I strongly disagree with the way the matter has been treated by Debtocracy.

That said, I agree with some of the IMF's programme, including liberalisation of the labour market and the professions, privatisations and of course with fiscal austerity itself. I wish less emphasis was placed on tax and public investment and more on benefit reform and government consumption. I also believe that the IMF reforms that I do support should have come at the urging of the Greek people, not some outside agency. If we can't do it for ourselves, we'll only reverse it when the IMF is gone.

A libertarian's instinct is quite simple in these cases: insolvent debtors (like Greece) must be allowed to default and creditors must be allowed to take their losses without compensation. That's how it's supposed to work. I do believe this but I also think that human nature introduces some constraints - make people too miserable too quickly and they will turn back the clock by decades. The closest I can think of to a good compromise is bail-ins, and I've called for this to be our primary response.

I am on the record as demonstrating that the cost of internal devaluation without substantial reform will be enormous, throwing living standards back to the late 60s. However, I also realise that unilateral withdrawal from the Euro would be enormously costly and even impossible. This means that I believe in striking a deal with Brussels and Frankfurt which would involve the entire European banking system.

The deal I would like to see would be based on bail-ins, forcing creditors to accept equity stakes in debtors which would then allow calmer markets to price in the right level of default - Europe would only have to use its bailout tools in order to ensure no one takes an equity stake in sovereigns. I am also a big fan of Europe advancing future subsidy money to us instead of handing us any further loans, which will help, in the post-default world, to ensure that we are weaned off the corrosive influence of European subsidies and might actually increase FDI.

I have written before that the purpose of bailouts is to give one party (usually the Government but others too) some time to reallocate losses from a default away from the people they want to protect. In this case, the EU and IMF were always going to opt to protect European banks, and the Greek government would opt to protect their constituents - which is not to say the Greek people; just that part of the Greek people that they think are important to their re-election. Although if I'm honest, it's up to the Greek people to put pressure on the Government with regards to who needs protecting. To me the optimal scenario now is one in which we use the bailout to buy time to return to a primary surplus - after which point we default on as much of our debt as we can get away with.

The reason I am so hell-bent on an orderly v. a disordely default is two fold. First, because we need to be able to finance ourselves after the default. If we give the wrong signals, we could be shut out of markets for many years and if we don't have a primary surplus that will mean more pain (see here).

Second, unlike Dubai or Iceland, or even Ireland come to that, Greece has been relying on its current unsustainable model for 30 years. All of our social structures, all of our politics and all of our economy are tainted by its poison. Remove the loose supply of debt and there isn't readily something else to prop up the way we live. And while letting the political system collapse is appealing to me, letting household finances collapse is not. People say in response that the Greek people can't possibly suffer more in default than they are suffering now. If you believe this, then you haven't travelled very much and are probably less imaginative than you think.

Finally, I believe that, in the long run, publicly traded government debt is a very small subset of our government liabilities and that without reforming the liabilities created by our welfare system we will not become truly solvent even if we somehow manage to default on all of our debt in one go. That's another reason why I don't like the defaultnik literature in Greece - they don't seem to realise that the problem is much wider than the evil machinations of our creditors.

What do I think of the Greek people? We are no better or worse than the Swedes, the Germans, the British or the Zimbabweans. We respond to incentives and when incentives are skewed we act in ways that are harmful to ourselves and others. The role of the state in Greece has been so warped for so long that generations have been born and died believing that the role of the Government is to run the country, rather than the State. Like any other nation, Greeks don't like tradeoffs and it is the role of the political leadership to make tradeoffs explicit while seeking ways to overcome them. Ours did not. They simply pretended they do not exist.

I do believe, however, that freedom comes at the price of vigilance and the Greek people have not been vigilant enough or have accepted corruption in return for personal gains. There is no point at which the Greek political system forces people to choose one party or the other, and elections are free. Sure, the media will come up with their own propaganda in favour of major parties, but frankly it is the citizen's job to see through it. We know who owns the media and can take note of what they do and do not report. Plus in the age of the internet, media oligarchy is no excuse (nor is it a viable business model). I've spent the last five years not watching the Greek media and I still get all the information I need, thank you very much.

This doesn't mean that the Greeks somehow deserve some kind of punishment. Simply that we shouldn't blame outsiders. It does mean however that we are bound by the Government. If you don't like how much power the Government has to bind you into spending and debt, then vote consistently for whoever promises to reduce this power. We have not. Tough shit.

This is a reversal of the Greek saying, "The fish stinks head first", meaning that the leaders are to blame when things go wrong. I don't believe this. Sticking with the analogy, I believe it's relevant when you are a fishmonger but irrelevant if you are the fish, which can only be all alive or all dead but nothing in between.

Nor do I believe that surplus nations have some kind of moral high ground over us. They respond to incentives just as we do. Their incentives are skewed in favour of production; ours in favour of consumption. If we were to swap places they would only act as we do.

I believe in the Rule of Law. I believe that once you denounce that it's Good Morning Zimbabwe in a flash. I believe that it's right and imperative to punish those who have broken the Law, and that we should strive to change the Law so that what is generally believed to be unacceptably immoral is made illegal, subject to evidence of the public's beliefs - via referendum if necessary - and respect for human rights, or else we'd end up making things like homosexuality and atheism illegal.

However, I do not believe that we can expect the Law to punish anything beyond what the Law prescribes, or apply new laws retroactively. If the Courts do not apply the law, then we need to pile pressure on the Government to clean them up. Have we ever demonstrated for a truly independent judiciary? Not in my memory. Another case of failure in vigilance and such a crucial one at that.

While we're waiting for the Courts and the Law to change, it should be social, rather than legal, sanctions that we shoudl use to make things right. The first of these are dinner table sanctions, which we failed to apply - did society shun known tax dodgers in private interaction? Or people with non-jobs in the public sector? Or champagne socialists? Or irresponsible employers? Or the Far Right? Was this stuff brought up at the dinner table? Well if it wasn't it should.

I also believe that we should refrain from the Greek hobby of netting off social ills. Two wrongs don't make a right. If regulation makes it too hard to employ people, we should relax regulation. If businesses get around this by illegally abusing the employment relationship, we should crack down on them. We should not accept one as a pressure valve for the other and tolerate it by turning a blind eye and permitting the other. The same argument works with tax and tax evasion.

Similarly in our misguided tribalism we net off wrongdoing by one faction against wrongdoing by another. If the police are being brutal and have too much latitude in carrying out their duties, we should rein them in, sharpish. If a small part of our anarchist population think torching people alive is fun we should catch them and bring them to justice. But suggesting that the two somehow net off, or that one side is more 'right' if the other side is more brutal is tribal pointscoring bullshit and people should wear bells for indulging in it.

Finally, I believe in Parliamentary Democracy. No I don't believe ours works. I believe in Proportional Representation, which keeps parties on their toes and forces them to learn to compromise and build bridges. But to denounce the whole thing is ludicrous. Look at the happiest places on earth, or the most equal, or the most just. Their system is more similar to ours than to any spurious notion of Direct Democracy. DD works for whichever 200 people in Syntagma are close enough to the Assembly to take the floor and vote, but it doesn't work for 12 million people. I am happy to be proven wrong. The closest we can get is referenda, and I am entirely in favour having those; we don't have enough as it is. As long as we realise that the will of the people can change and are mindful that we don't get locked in to what people believed at one time forever. All of this should be written into our Constitution so that the Greek people can trigger a referendum relatively easily. We cannot, as things stand, and that's wrong.

So this is what I believe. Please leave comments if you disagree and I will try to update this to explain as many of my views as possible.

Tuesday, 14 June 2011

UPDATE #2: Please make sure to note CoveringDelta's response to my critique and also his comments on this post. Dimitri has done the honorable thing and issued a correction as well as a robust defence of his editorial choices, and so is owed - as he correctly notes - the same courtesy. I have therefore amended the language of the post as requested by him; apologies for the delay, Dimitri, but I was travelling most of yesterday.

UPDATE: Alphaville have been in touch about this almost immediately over Twitter, and issued a prompt correction that seems genuine enough to me. Try not to give them too hard a time, as to err is human and they have served us all well in the past. I am still not happy about that post being up for everyone to find but at least a certain level of integrity has been restored.

I hope Zerohedge will do the same, as it turns out they too have reposted this hoax. Needless to say I'm pulling them from my list of links as well, but I think we'll have to take them on tomorrow. Suggest Twitter hashtag #ZeroBrains

I'll restore them to the blog's links eventually but let's give them a few days first. I'd hate to have to take them back off again if they relapse.

Readers will not that I've also spent some time criticising the source that originated the Alphaville story in the first place: NY Greek Demetri Kofinas of @coveringdelta who in my opinion could have done a little bit more digging on the usual quality of S. Chios' reporting or at least listened to what he cites as his sources ('the internet', 'the bibliography', 'K. Hardavellas'), or at least questioned why it is he cannot provide footage of the works but must cut to black and white archive photos, all the while urging VIEWERS to go see for themselves. Presumably if viewers can go and see, so can a TV crew, yes?

I would add to this the sheer impracticality of MPs walking 9-10 km in the (supposed) tunnel to Peireaus, and whether it would have made sense to them to risk getting trapped in such a thing when there are perfectly serviceable alternatives.

I still wish to note Demetri's response to the objections of commentators on the Alphaville site:

@ George

It's from a mainstream news outlet in Greece George. What do you want the FT to do, send an investigative team to Lykavito and search the mine shafts with little flashlights? It's a globalized world. You do what you can.

DIMITRI, YOU *ARE* THE SOURCE!!! It is you that Alphaville and the rest (none of them Greek speakers) trusted, not a TV programme they don't know in a language they can't understand. Just because you're a not journalist doesn't mean you can't caveat a story, especially when the stakes are so high.

Now as to how Chios' say-so got turned into an almost-publishable fact... That tends to happen when other, more serious people who however don't have the time to do any background work on the story refer to it in the understanding that it's *just about* plausible enough, and so onwards until you reach someone who can be taken seriously (on things that they know about) and is generally assumed by others to speak with authority. So first @StaceyHerbert of the much celebrated Keiser report posts this on her feed, then a whole bunch of people among whom @LorcanRK, Chief Europe Strategist at Trend Macrolytics LLC who added: 'I love this story!' and then of course Alphaville. (She has since indicated she didn't think for a moment that it was true).

===============================================================

THE ORIGINAL POST

Dear readers,

you know I'm the last to blame smirking journos for our economic woes but in this one instance I will make an exception.

Please write to @FTAlphaville and @FTAlpha if you think this is irresponsible bullshit. Twitter hastag is #AlphaFAIL [Note I am no longer using this following Alphaville's correction]

Alphaville is banned from my blog's links until they address this with a sincere apology.

Monday, 13 June 2011

Twitter friends alerted me this morning to a new batch of delusion being peddled by the pub crawl crowd in Greece. Readers will recall that pub crawl theories are a reference to one of the best analogies I’ve seen so far of Greek debt repayment delusions, originally reposted here:

When you’re having the time of your life and suddenly the lights go on and you’re told the party is over, what do you do? Someone pipes up and says: ‘why not go to the bar next to my place and keep this up?’ And the crowd goes ‘Yeeeah!’

We’ve tried getting Indiana Jones to bring back the stolen Nazi gold. We’ve tried free bailouts from the Russians, the Chinese and even the Swiss (WTF dude?). We’ve tried inventing nonexistent oceans of oil and gas, diamond deposits criss-crossing the land, pools of pure gold and uranium and of course LOL-ium138, the radioactive isotope of LOL-ium found only in Greek defaultnik blogs, which causes permanent stupidity and whose half-life is a billion years. Now that this crap has failed to catch on we come, finally, to the final pub, the one whose name is never far from the tip of the populist's tongue – the selective abolition of property rights.

Enter economist Dimitrios Kazakis, a recent darling of the Greek Indignados, who shot to fame with this video (titled: THE BEST ECONO-TECHNICAL ANALYSIS EVER MADE ABOUT GREECE, whatever ‘econo-technical’ might mean), which has gone floppily viral like an elderly streakers’ club. I was amazed actually because despite his abhorrent politics he generally sounded reasonable enough to me. Not any more.

In short, Kazakis has written a post arguing that our debt problem could be substantially reduced if not eradicated by taxing the wealth of high-net-worth individuals in Greece. For data, he draws on the Credit Suisse Global Wealth Databook, which readers may recall from my half-finished scenario page here, though cunningly he’s omitted any hyperlink to the original so that his readers may reach their own conclusions. Anyway, I’ve included it above and in the comments section.

With a grand flourish, Kazakis reveals that, according to Credit Suisse, private wealth in Greece is close to 300% of GDP, or an absolute $897bn as of 2010. This he pretends to find shocking but actually, since wealth is a stock figure and income is a flow figure it’s fairly normal. If anything, given that the average economically active life of a Greek person spans decades, it’s only fair that accumulated wealth should be a multiple of GDP. That has been the way of every economy since the industrial revolution.

Anyway, back to the wealth issue, and the CS report. Turn to p. 72, do a little population math, and you will see that of the total household wealth in Greece, a net $162bn as of 2010 ($339bn assets minus $176.5bn liabilities) was in financial assets, and the remaining $736bn was in non-financial assets. This, by the way, represents a 72% rise in private wealth per adult between 2000 and 2010.

Naive readers will predictably recoil with shock at the massive numbers. It must be the rich weighing this upwards. He must know what he’s talking about, look at how big his numbers are! Actually, at under $100k, mean adult wealth in Greece is equivalent to a modest house owned between two people. And home ownership in Greece is a staggering 84%.

This is where, pumped up on hopium, or perhaps Extasyntagma, Kazakis bids a fond farewell to reality by assuring his readers that:

...these data are derived from private wealth management firms and refer only to those with enough wealth to merit management by professional asset managers. This means that this wealth total does not include all of those who hold some bonds by way of savings, or some real estate for their security in old age. The data we provide refer to about 60 thousand Greek residents and this refers to assets held at home (whether liquid or illiquid), which appear nowhere and are registered nowhere.

I am tempted to add: ‘Trust me, I’m an economist.’

Actually, as it happens, he either failed to read the report properly or is lying deliberately. You can tell that the 897bn figure refer to the whole population by looking at pg. 84 and multiplying mean wealth per adult with the number of adults to derive the same 897bn figure. Moreover, Credit Suisse do explain, in pp. 11-14, where their data on Greece come from. For financial assets and liabilities, it’s actually Eurostat, whose tables do make for interesting reading.

CS’s estimates also rely on extrapolations of publicly available data, using a power law function to simulate the tail end of the wealth distribution – the ultra rich. Credit Suisse are so unconvinced of the quality of their country-by-country estimates of the wealth of high net worth (HNW) individuals (their target audience) that they simply refuse to report on them. In fact, they only seem willing to report estimated numbers (using the methodology described above or international figures at the super-aggregate level. They make these points explicitly in the report, so to assume that Greece has been an exception is a little disingenuous.

So to summarise, Kazakis has either misrepresented his data in order to support a conclusion he was always going to get to anyway, or has been blinded by his prejudice into seeing only what he already believed: that we must seize the assets of high net worth individuals. Why not just say that and be done with, sparing us the amateur dramatics?

Something good did, however, come out of this.

With this admittedly misguided post, Kazakis has scored a spectacular own goal, exposing one fact which, to my profound embarrassment, I had not thought to check. You see, as you can tell by glancing at pp. 84 to 86, both Argentina and Equador, the poster-children of the defaultnik movement in Greece, have more unequal distributions of wealth than Greece, as measured by the Gini coefficient of wealth distribution. So does Chavez’ Venezuela, the darling of carefree populists. So do Communist China and Vietnam, who are nobody’s darlings in Greece but at least they seem to be making socialism produce some gains for the actual people. This is not to say that Greece’s distribution of income or wealth is optimal (a lot of it is still driven by systemic distortions supported by the state) but if the premise is that it is suboptimal because it is extremely unequal, then that premise needs be revisited. Bear in mind here that CS has an incentive to over-estimate, not under-estimate the concentration of wealth in Greece and indeed in all countries as extreme inequality makes more money for the wealth management division.

In fact, since we’re talking defaults again, it appears to me that, out of 13 countries that were in foreign-currency default in the past decade as some would have us do right now, ten now sport wealth gini coefficients worse than Greece’s (source). - Note: some people seem to be getting confused here. The Gini coefficients comes from the CS paper cited by Kazakis. It's only the default info that comes from the source. PLEASE read the blog properly before commenting.

Perhaps they were even worse to begin with, but my take on this is slightly different. My take on this is that default is followed by massive inflation (yes, trolls, that's what happens when you leave a hard currency for a softer one, especially if it's a good idea in terms of competitiveness), and inflation is a cross-subsidy from savers and wage earners to investors (the cleverer ones at least, but then the richer ones can afford cleverer asset managers too). In a more financially developed country like ours the effect would be heavier, not lighter.

And as one of my commentators points out below, other countries usually held up as exemplars, like Denmark or Sweden, both absolutely kick-ass countries by the way, also have more unequal wealth distributions than Greece. So do places like the UK, the US etc, where it could be argued that a lot more wealth is stashed offshore because the financial system is so much more developed. In fact, as another less approving commentator points out, some inequality can be the result of innovation and enterprise and is probably acceptable.

To rephrase: the Greek wealth distribution is actually pretty equal by global standards. And that's that really.

A note on the Gini coefficient:

As per one comment made below, a Gini coefficient is a property of a statistical distribution. There is a wealth Gini, an income Gini (which some people have used in critiques to this article), a longevity Gini and in fact a Gini coefficient for just about anything you can describe through a statistical distribution.So let's please try not to confuse the matter. Credit Suisse's Gini coefficients refer to wealth; because a lot of the consumption of the typical household is fixed, savings rise disproportionately with increased income, and therefore income Gini coefficients tend to be much lower than wealth Gini coefficients. As readers of this blog know, Greece's income Gini, despite being almost half the wealth Gini, makes us a very unequal country in income terms.

For further reading on how Greek fiscal policy affected income (but not wealth) inequality measures in Greece, check out this post if you haven't already.

Saturday, 11 June 2011

A sensationalist title (some of you are biting already), but do bear with me. This will be a very brief post.

I've heard a good deal in the last two years about how Greece has been hijacked by thugs who have been fleecing us for all we're worth. I've got some sympathy for this statement, though you won't be surprised to find I interpret it slightly differently from many other commentators. Also, I like to back up what I say with evidence. So here goes.

Some of you may have come across the Political Compass: a clever little test that, instead of looking simply at where one sits on the left-right spectrum, combines this with a reading of where one sits on the authoritarian-liberal spectrum: whether they want freedom to prosper or suffer according to their choices or a measure of state guarantees that no matter what crap life throws their way they will be given some basics and a helping hand. I took the test a couple of years back and the result will not surprise you, although my friends' results might.

Now you might think that the libertarian corner is a pretty lonely place, the political naughty step reserved for bloodthirsty neoliberals. But in fact you may find, upon reflection, that I am in very good company. Consider for instance the Political Compass rating of the European ruling parties as of 2008:

Not too shabby, and probably about right actually - although I bet some of these governments will have since shifted to the Left, if they know what's good for them. Now, if only we could sort of replicate this for the entire Greek people - what a lovely insight it would give us. Turns out we (sort of) can. Astute readers may remember this post, where I used data from the 2008 Survey of European Values (which you can get for free here) to look at Greek attitudes towards foreigners.

So I did some snooping around tonight to see what else I could dig up and managed to draw up a nice little grid of the Greek population according to where they sit on this spectrum. You see the Survey asks respondents whether they prefer to trade off freedom for equality or vice versa and where they would place themselves on the Left to Right spectrum, on a scale of 1 (far left) to 10 (far right). I also threw in an extra measure. I assumed that everyone who responded 'Neither' to the 'Freedom v. Equality' question is not comfortable with tradeoffs in general. I also assumed that everyone who rated themselves 5 or 6 (the two middle points) on the Left-Right scale also has trouble accepting tradeoffs. I know I'm goint to get some stick from people over the latter assumption but I'll stick to it. You have a 10-point scale to choose from dude. WTF does 5 mean? Or 6 for that matter. Give me a break.

Run this analysis and you get the following grid breakdown of the Greek population (weighted figures, thank you very much) as of 2008, just before the 30 years' worth of shit we pretended not to see hit the massive, country-sized fan we spent 30 years building so we couldn't smell said shit. It looks like this:

I've done the math for you too:

Old school socialists (including communists): 13.5%

Liberals (modern definition, including but mostly not anarchists): 12.6%

Fascists (big or small f): 10.2%

Libertarians: 16.7%

People who think they don't have to make tradeoffs: 49% 47% (The figures in the pic add up to 100 even if my sloppy, early morning sums don't. Still, many thanks for the correction!)

Dear god, we never stood a chance... The people that don't believe in tradeoffs would decide any election hands down. That's why we can't help but elect whatever muppet tells us that 'there is money' (Yorgo), or that his first priority will be the following five priorities (Karamanlis Jr). These are the people that have run Greece to the ground with their stupid voting for years, making a mockery of elections. They are, in fact, collectively, the real Greek dictators.

Wednesday, 8 June 2011

Readers may, for some time, have noticed that my old friend @Zirzirikos is credited as a contributor to this blog. You may have been wondering whether he actually writes here as all. In fact, he does not; he's just doing me a favour as it is comforting to know someone can jump in and take over one's blog should one be flattened by killer cucumbers.

However, as a seasoned Greece-watcher, blogger, technologist, and debater, it was only a matter of time before @Zirzirikos put virtual pen to virtual paper and started writing about the Greek question. Unlike myself, he's not afraid of semi-literate trolling so he writes in Greek.

I am therefore proud to direct Greek-speaking readers to his new blog, Ζιρζιρίσματα, dedicated to commentary on the Greek situation from the point of view of a Greek living abroad. I cannot be sure that @zirzirikos' blog will espouse similar views to mine (our conversations suggest otherwise on several topics) but I'm sure he will argue them as well as anyone could. I'll be checking regularly for inspiration.

Whatever happens to Greece in the coming years, you can bet your bottom dollar one thing will not survive as we currently know it: the Greek Constitution. It's a cracking read; I thoroughly recommend it. Sadly, the political elite never had much respect for it and the Sainted People are already of a mind to wipe their collective ass with it; especially the bits about private property.

Amazingly, there is something very ordinary about the life of the Greek Consitution: it is conforming almost exactly to the historical patterns of constitutional survival.

How do I know? I know due to the amazing work of Tom Ginsburg of the University of Chicago. He's engaged in a massive project trying to figure out why some constitutions live longer than others. You can check out a draft of his report on this project here. The basic facts are these: the average constitution lives for about 17 years, but there are two particular rough patches: the 10-year and the 35-year itch. The 10-year threshold was crossed back in '85, and sure enough in '86 the Constitution was first amended to completely remove the last of the remaining powers of the President of the Republic. Well, guys, the Constitution turned 35 last year: the single most dangerous year in a Constitution's life. Since then, we haven't been sovereign and there's been a lot of legal stuff to get through so hey. One more year.

Now you might argue that this statporn is a little too slavish. There is no such thing as determinism and magic numbers in politics. I agree. But it is also true that Constitutions can outlive the conditions that first gave birth to them. Maybe the trends in constitutional survival are simply an indication of how quickly the political reality comes out of sync with institutions that once served it reasonably well. Stick with me on this one if you still disagree cause it gets interesting.

Turns out that, according to Ginsburg, there are factors that you can watch to see whether I'm on the right track. Turn to page 59 for a list of precipitating factors (literally, factors likely to tip you over the edge).

Losing a war (which some people think we have in a way, as we have lost sovereignty)

Widespread constitutional change globally

Lack of constitutional change in neighbouring countries

Transition to a more authoritarian government

Coups

Lack of change of the effective executive (in our case, few or no consecutive changes of Prime Minister)

Conflict (this is a general term including incidents such as anti-government strikes on the lower end of the scale and guerilla warfare somewhere on the higher end).

So if you're a constitutional lawyer and you wake up one day to find that Yorgo is still clinging on despite open rebellion from his own party and the Socialists seem unlikely to be overthrown, if you find that people around the world but *not* our immediate neighbours are overthrowing their governments or forcing them to change the constitution (chances are you have), if you find that the army has taken over, or some leftist nutcase who sets the police or some rabid People's Militia after everyone he/she doesn't like, or if you find that the Government has started to really crack down on civil liberties, well, get your best MontBlanc out.

Once you've got these factors stacked up against the hapless Constitution, there are a few characteristics of the Constitution itself that can help tip it over that much faster. It's important to take note of these as our new constitution will have to steer clear of them too:

If it was ratified by a public or constitutional convention, but under the auspices of an undemocratic regime (nope)

If it was not ratified by a public or constitutional convention at all (nope)

If the country is acknowledged as being ethnically heterogenous (getting there)

If the country is poor or underdeveloped (nope)

If the constitution was not meant to make the system more democratic (nope)

If the constitution is, by design, hard to review or amend (check). This is a very strong effect

If the constitution is a short text that does not make allowance for different political scenaria or occurences (sort of; it is long, don't know about complexity; but this is one more reason to be suspicious of the half-baked indignado bullshit hatched over at Syntagma)

This is a tricky one because it suggests that structurally the Greek constitution is probably not built to last. The precipitating factors are mostly and so are many of the structural factors, but not all of them. This means, to my mind, that it will be tricky amending the constitution, and even then only specific things will be changed; we won't get a wholesale review.

Now there are many reasons why Constitutions shouldn't live forever, and they are reviewed quite thoroughly by Ginsburg. But there is one overriding imperative from where I sit which advocates in favour of a long-lived new Constitution: Foreign Direct Investment doesn't really take off until a Constitution has passed its 35-year test, perhaps not coincidentally.

A constitutional.dividend 35 years from now may not sound like much but it just might be factored in by bond markets; some in Greece are secretly hoping to borrow bilaterally from China for a few years as well, and the central planners in Beijing will sure appreciate some staying power in our institutions if they're going to take a punt.

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LOL GREECE is a non-revenue blog intended as evidence-based and occasionally satirical commentary on the state of the Greek economy. The author, Emmanuel (Manos) Schizas, holds both Greek and British citizenship and is a permanent resident of the United Kingdom, where he is employed and duly taxed. The rest of his family (both parents and one brother) live in Athens.

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